Question

PA9-1 Calculating Direct Material, Direct Labor, Variable Overhead Variances [LO 9-3, 9-4, 9-5] Barley Hopp, Inc., manufactures custom-ordered commemorative beer steins. Its standard cost information follows: Direct materials (clay) Direct labor Variable manufacturing overhead (based on direct labor hours) Fixed manufacturing overhead ($276,000.00 + 120,000.00 units) Standard Quantity 1.70 lbs. 1.70 hrs. 1.70 hrs. Standard Price (Rate) $ 1.80 per lb. $ 13.00 per hr. $ 1.10 per hr. Standard Unit Cost $ 3.06 22.10 1.87 2.30 Barley Hopp had the following actual results last year: Number of units produced and sold Number of pounds of clay used Cost of clay Number of labor hours worked Direct labor cost Variable overhead cost Fixed overhead cost 125,000 218,200 $ 370,940 170,000 $ 2,805,000 $ 240,000 $ 300,000

Answer 1

Requirement 1

Material Price Variance	$         21,820.00	Favourable-F
Material quantity variance	$         10,260.00	Unfavourable-U
Total Material spending Variance	$         11,560.00	Favourable-F

..

Labor rate variance	$      595,000.00	Unfavourable-U
Labor Efficiency variance	$      552,500.00	Favourable-F
Total Labor Spending variance	$         42,500.00	Unfavourable-U

.Working

		125000	Units
	Quantity (AQ)	Rate (AR)	Actual Cost
Direct Material	218200	$            1.70	$       370,940.00
Direct labor	170000	$         16.50	$    2,805,000.00

.

Standard DATA for		125000	Units
	Quantity (SQ)	Rate (SR)	Standard Cost
	[A]	[B]	[A x B]
Direct Material	( 1.7 lbs x 125000 Units)=212500 lbs	$              1.80	$          382,500.00
Direct labor	( 1.7 Hour x 125000 Units)=212500 Hour	$           13.00	$      2,762,500.00

.

Material Price Variance
(	Standard Rate	-	Actual Rate	)	x	Actual Quantity
(	$                    1.80	-	$                     1.70	)	x	218200
	21820
	Variance		$           21,820.00			Favourable-F
Material Quantity Variance
(	Standard Quantity	-	Actual Quantity	)	x	Standard Rate
(	212500	-	218200	)	x	$              1.80
	-10260
	Variance		$           10,260.00			Unfavourable-U
Material Spending Variance
(	Standard Cost	-	Actual Cost	)
(	$       382,500.00	-	$        370,940.00	)
	11560
	Variance		$           11,560.00			Favourable-F

.

Labor Rate Variance
(	Standard Rate	-	Actual Rate	)	x	Actual Labor Hours
(	$                  13.00	-	$                   16.50	)	x	170000
	-595000
	Variance		$        595,000.00			Unfavourable-U
Labour Efficiency Variance
(	Standard Hours	-	Actual Hours	)	x	Standard Rate
(	212500	-	170000	)	x	$           13.00
	552500
	Variance		$        552,500.00			Favourable-F
Labor Spending Variance
(	Standard Cost	-	Actual Cost	)
(	$   2,762,500.00	-	$     2,805,000.00	)
	-42500
	Variance		$           42,500.00			Unfavourable-U